Money

Obama’s Cap on Savings Would ‘Penalize Success’

from Newsmax –

President Obama’s proposal to limit tax-preferred retirement savings would penalize success and patience in favor of “the nebulous concept of fairness,” according to one analysis of the unprecedented plan.

Obama’s fiscal 2014 budget has a section stating: “Individual Retirement Accounts and other tax-preferred savings vehicles are intended to help middle-class families save for retirement. But under current rules, some wealthy individuals are able to accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving.”

The budget would limit an individual’s total balance in tax-preferred accounts — which include IRAs, Roth IRAs, and 401(k) plans — to an amount sufficient to finance a maximum annuity of $205,000 per year in retirement, or “about $3 million for someone retiring in 2013,” the budget estimates.

The first problem with the proposal is that it won’t do much at all to help solve the federal government’s economic problems, reports The American, the journal of the American Enterprise Institute.

Baby boomers on average reportedly have less than $100,000 saved for retirement, and many younger Americans are burdened with student debt, so the revenue produced by the plan would likely be disappointing.

The budget itself predicts that capping contributions will increase revenue by only $9 billion over 10 years, which will cover the current deficit for about three days, The American observes.

Plus, the revenue raised isn’t new revenue. Taxes paid earlier because of the inability to put money into a tax-preferred plan would otherwise be paid later when the money is withdrawn.

While $205,000 a year may appear to be a sufficient sum today, it may not be sufficient for those who live 20 or 30 years after retirement. With an inflation rate of 6 percent, after 30 years $205,000 would be worth around $40,000 a year today, according to the article by Blake Hurst, a frequent contributor to The American.

Another problem: “The budget offers few details on how the government would enforce this cap across a worker’s various accounts, but you can bet it would be complicated,” The Wall Street Journal said.

“Right now the government doesn’t track tax-deferred account balances. Financial firms don’t have to send IRS 1099 forms to investors unless there’s a distribution. So the IRS would get new power to impose new burdens on millions of taxpayers.”

Hurst concludes: “There have always been income limits on contributions to the various tax-deferred accounts, but this is the first time there will be limits tied to the dollars in the account.

“The proposed limits directly penalize success in the management of money and the patience to let money grow.”

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David
6 years ago

A lot of Retirees are struggling by on JUST Social Security of $800 – $1200 a MONTH…..Of course, if they had $205,000 a year they would find a way to blow it in a month and a half anyway. If you work 40 years and have no money to show for it, let’s face it, you made a lot of very poor money management mistakes with your income and you did not understand what Social Security was or what is was going to be for. It is your own fault YOU are broke, not your kids, not the neighbors, not… Read more »

Carl
7 years ago

I wonder how many people this would have an impact on? Probably most of DC’s population…

Tom A
7 years ago

Isn’t it apparent that Obama’s agenda is to ultimately bring down the U.S. economy and destroy our values. He tries to eliminate incentives to succeed and replace the incentives with opportunities to let the government run your existence. Let’s face it, he is not capable of developing such a grand scheme. He is only a puppet. We only have to look at Obamacare and the speed that it was created. It was in someone’s closet, waiting for the opportunity to be exacted by fools being allowed to vote. We need people in Congress to fight for people’s rights. Obviously, it’s… Read more »

Nathan M. Duhl
7 years ago

So what! Obama is an idiot incapable of the office other idiots elected him for.

rdsbobby
7 years ago

This administration has vilified hard work and success. It is time “we the people” vilify the real reason for our failures as a society and as a financial beacon. We need to articulate hard work and personal responsibility. I am a government employee; I see the cream of the lazy and the entitled mentalities. They lack ethics and feel someone owes them something. This attitude is the same that is becoming common place in our society. This president, if he had any guts, would stand up and profess the basic values that made this country what it once was. Instead… Read more »

W. Stewart
7 years ago

WHERE IN THE HELL IS THIS GUY FROM !????
$200 K IN 1930 WAS ” TERRIFIC !”
WHAT WILL IT BE IN 2020 OR 2050 ??
GET OUT OF OUR BUSINESS !!!

David Diebold
7 years ago

After 30 years $205.000 would only be worth around $40,000. Pure B.S. If you assume 3% inflation instead of 6% the future value would be more like $80,000–a little more realistic and a little less dramatic.

Tony
7 years ago

I like when some fool says we can save such and such amount ten years from now. How do they know what will be ten years from now. We can fix the problems NOW. None of us have tomorrow to look forward to. We are not promised a day past today. Let’s fix these problems NOW! The best way to start is by impeaching the usurper falsely holding office as our president. Get rid of his Czars. Cancel all executive orders made by the usurper. Petition states to force term limits on congressmen, senators and supreme court judges. We can… Read more »

Jim J
7 years ago

Well, I’ll tell you what. If you need more than 205,000.00 per year in retirement, you won’t get any sympathy from me or 98% of the rest of the people in this country!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

G. Nelson
7 years ago

It would not only “penalize success.” It would also punish thrift. What a mad, mad world they’re trying to create, one in which sloth, failure, stupidity, and dependency are all rewarded, while their opposites, some of our most basic traditional virtues, are punished!

Daniel Brintnall
7 years ago

Obama needs to be thrown out of office. He has done nothing but divide our country and gone against what our founding fathers intended and wanted for a nation of free people. I cant believe there are still people who support him. He doesnt have the good of the nation on his agenda. When he appears on the news my anger at what he is doing to our nation and the freedoms he takinbg away from us,I cant stand to look at his smurking face. I have no respect for him, and that is sad to feel that way about… Read more »

Jimmy Ferris
7 years ago

When did it become the constitutional duty of this or any other president to determine what or how much American citizens should be allowed to earn?
Why not impose a cap on the earnings (from any and all sources) of George Soros, Warren Buffet, etc?
Why not impose a cap on Michelle’s vacations?
Better yet, it’s time to lead, follow or get out of the way.

PATRICIA
7 years ago

THIS IS WHY WE MUST HOLD THE HOUSE AND TAKE BACK THE SENATE IN 2014..OBAMA MUST BE STOPPED!!!!GET IN THE FIGHT PEOPLE…

Bill
7 years ago

So the rich will be held to the same standard as the middle class. If the wealthy need to find another place to park their money for retirement, I can tell them where to put put it…

PaulE
7 years ago

This is yet another attempt by Obama to impose the socialist concept of “fairness” (equality of outcomes) on the American people. If someone has been able to set aside the legal limits of contributions each year into an IRA or 401K and then managed, through wise investment choices, to grow those savings into millions of dollars, all I have to say is God bless them. It was their money that they put into the IRA or 401K in the first place, not the government’s. Secondly, if they were able to grow their money to level where they will be self-sufficient… Read more »

JR
7 years ago

This is part of his redistribution of wealth agenda. Take your hard earned money and give it to others under one of his programs.

susan nichelson
7 years ago

Damn him! That better not pass! What does this have to do with the budget, except he wants to tax the excess? Congress better not let him get away with that! Can they omit that part?

Cathy
7 years ago

So the same goes for Obama’s retirement amount, right?

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